Can Industrial Automation Software Weather Tough Times?
Cambashi highlighted the interesting key trends in the market: 1) Energy and labour cost inflation, grid upgrades, and supply chain digitalization could continue driving ongoing software demand. 2) Software penetration of construction workers & managers continues to present Building Information Modeling (BIM) opportunities. 3) The Manufacturing Operations Management (MOM) market and Industrial IoT/connected applications space continues to face positive outlook.
During the Great Financial Crisis (GFC), although the growth of engineering software markets were affected by the impact on the downstream industries (declining c5-15% in 2009), they bounced back sharply in the following year with 10-20% growth in 2010. This was followed by another year of faster growth before the growth rates normalised to traditional levels around the high single-digit level.
Interestingly, the engineering software spending outperformed the manufacturing value-add growth during the period (value-added in an industry can indicate growth of the corresponding software market over the mid-term). During the COVID-driven downturn in 2020, Engineering software markets saw merely a slowdown in growth to around 5% before re-accelerating to double-digit in 2021-22.
In the current environment, Cambashi sees higher energy cost as a driver of software market growth with rising requirements for sustainability to be 'designed-in' at the planning and development stage of products and systems and with the push for higher energy efficiency of manufacturing and operations.
Further drivers of software growth include 1/supply chain management is becoming increasingly comprehensive and 'joined-up,' hence requiring complete digitalisation and data integration; 2/ push for energy independency requiring grid redesign and connectivity improvement, driving demand for simulation and IIoT software; and 3/ rising labour cost driving need for production optimisation, flexibility, and automation, also triggering demand for Computer Aided Engineering (CAE) and BIM software.